With weekly jobless claims data and ADP’s private sector payroll report slated for release ahead of Friday’s all important government payroll report, traders will get their first major news headline of the new year. The jobs data should provide the market with the catalyst it needs to get moving. The only question is which direction will the market choose, up or down?
Throughout the month of December jobless claims repeatedly came in below the psychologically important 400,000 threshold. However, because of the holiday shopping season, many pundits thought the data may have been skewed. Now that the holiday shopping season is over, this weeks jobless claims should give market participants a truer indication of the jobs market.
While the unemployment level is still too high for the market’s taste, a continued trend lower in the number of people filing for unemployment benefits could underline a subtle shift in sentiment amongst job seekers. If less unemployed people are filing for benefits, then presumably they are feeling better about their chances of landing a job in the near future.
From a technical perspective, the S&P500 seems to be having a hard time deciding if it wants to test its October highs or pullback — as evidenced by SPX trading in its second tightest range in over a month on Wednesday. Therefore, the jobs and retail data will likely have to come in better than expected to be the bullish catalyst that forces SPX up towards its October high. Coming in at expectations will likely not be good enough for traders seeing as how they have already pushed the markets up over 5% in the last 2 weeks.
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